The United States (US) Internal Revenue Service (IRS) ruled in PLR 202140016 that a taxpayer (Taxpayer) can source gains or losses arising from certain commodity derivative hedging transactions (Commodity Derivatives) by reference to the source of gains or losses derived from the sale of the underlying inventory property being hedged. The IRS made its ruling by analogy to the inventory sourcing rules.FactsTaxpayer is a manufacturer that sells products for consumption or further processing. Taxpayer also purchases material for manufacturing in its plants when required, as well as finished products to sell to its customers (Inventory Property). Taxpayer executes thousands of sale and...